Building Your Real Estate Investment Team

A small investor buying a first rental needs a lender, a real estate agent who works with investors, an insurance agent, a real estate attorney, a CPA or enrolled agent (a tax preparer licensed by the IRS), and at least one licensed contractor, plus a property manager if you will not manage the home yourself. You need them in roughly that order: the lender before you make offers, the agent before you tour, insurance and contractors during the inspection period, and the CPA before your first rental tax return. Most of them hold a state license or credential you can check online before you hire. For where a team fits into a rental's income and workload, see what passive income is and what it takes.

Who you need, when, and what they cost

Getting started with real estate investing puts these hires into the full sequence from saving to closing.

Lender and agent: before you make an offer

Lender. Get preapproved with at least two lenders so you know your loan amount and down payment before you look. The CFPB suggests requesting Loan Estimates, the standard three-page quote form, from several lenders, since comparing them shows whether an offer is competitive. For a rental you will not live in, federal rules treat the loan as business credit and do not require a Loan Estimate, so ask each lender for one anyway or for a written quote with the rate, points, and fees. Compare the total origination charges, not each line item, along with the interest rate. Before you apply, look up the loan officer by name or NMLS ID at NMLS Consumer Access (nmlsconsumeraccess.org), which shows whether they may work in your state and any disciplinary actions.

Agent. Since August 17, 2024, under rules adopted in the National Association of Realtors (NAR) settlement, you must sign a written agreement with a buyer's agent before touring a home, in person or by live video. The agreement states what the agent will be paid. Seller payment is optional. Depending on your signed agreement, you may owe all or part of the fee if the seller does not cover it. NAR says compensation remains fully negotiable, and offers of buyer-agent pay can no longer appear on the multiple listing service. Ask how many rentals the agent has helped clients buy in the past year and whether they can pull rents for comparable homes. Then confirm the license on your state real estate commission's website.

Insurance, attorney, and contractors: during the contract period

Insurance agent. Get a landlord policy quote before your inspection contingency ends (the contract clause that lets you cancel after the inspection), because the premium changes your cash flow. The National Association of Insurance Commissioners (NAIC) says a landlord policy covers the house, other structures, your belongings, lost rent if the home becomes unlivable, and some liability, but not tenant belongings. Confirm with the agent that lost-rent coverage is included and what damage triggers it. It says to expect to pay 10% to 25% more per year than for a homeowners policy. Not every agent is licensed in every state; your state insurance department can confirm a license.

Real estate attorney. Hire one before you sign a purchase contract or partnership agreement you do not fully understand, and before forming an LLC to hold the property. Ask for the fee and the scope of work in a written engagement letter. To check a license, search the attorney directory on your state bar's website.

Contractors. Have a contractor price the inspection findings before you negotiate repairs, then line up someone for work before the first tenant moves in. California's Contractors State License Board (CSLB) gives this checklist; your state's board sets its own license and payment rules:

1. Check the license number with the state board; an advertised number may not be valid.
2. Get at least three written bids for the same scope of work.
3. Ask for proof of workers' compensation insurance; in California, contractors with employees must carry it.
4. In California, do not pay a home improvement down payment above 10% of the contract price or $1,000, whichever is less.

If the home was built before 1978, a contractor you pay for renovation, repair, or painting that disturbs paint generally must hold lead-safe firm certification. Under the federal rule, minor repairs and maintenance are exempt if they disturb no more than six square feet of paint per room indoors or 20 square feet outdoors. Window replacement, demolition of painted surfaces, and prohibited work methods do not qualify for this exemption. Certification comes from EPA, or from the state in the 15 states that run their own programs, including Georgia, Massachusetts, North Carolina, Oregon, and Washington. Ask the contractor before work starts whether the job falls under the rule and which certification covers it. Building vendor relationships covers keeping reliable contractors once you own the property.

CPA and property manager: before you start renting

CPA or tax preparer. Your first rental return reports rent, expenses, and depreciation, so hire before that tax year ends to set up records correctly. Confirm a CPA's license at CPAverify, a free search of official licensing data from 53 jurisdictions. For an enrolled agent, use the IRS directory of preparers with credentials. Every paid preparer must have an IRS preparer tax identification number (PTIN), and the IRS warns against any preparer whose fee is a percentage of your refund. Hiring a real estate CPA covers fees and when a CPA is worth it.

Property manager. If you will not self-manage, hire before closing so the manager can list the home right away. The National Association of Residential Property Managers (NARPM), a trade group, says a typical management fee is 8% to 12% of collected rent. Ask what else the manager charges you; the California Department of Real Estate (DRE) says the agreement should spell out any added fees, such as markups on repairs or accounting charges. Put the full fee in your deal numbers even if you plan to self-manage at first.

Licensing rules differ by state. In California, the DRE says a property manager's license must be valid and active to collect rent and manage your property; resident managers who live on site do not need one. The DRE also says to:

• Confirm the license status shows "Licensed" and check for disciplinary action.
• Make sure rents and deposits go into a trust account (a separate bank account for client money), unless they are paid to you directly or held by a neutral escrow holder.
• Ask how long it takes to fill a vacancy and how many tenants were evicted last year.
• Get a contract that requires monthly accounting and has a clear end date.

Finding a good property manager has the full interview list.